Hi bough a used car in 2019 for $15.7K. In June 2021 I converted to Business and deduct 3000 miles as a Standard Mile deduction for taxes in 2021. Then in taxes 2022 I deducted 7500 miles as Standard miles. I stop using it in 2023 (no miles) and sold it in January 2023 for $16K.
In Publication 463, it says that I have to depreciate the 10.5K miles x 0.26 = $2730. When I fill my taxes, it never asked me about the depreciation and it was displayed as "Sale of Business Property" and have to pay the taxes of the $16,300 (the sale of 16K plus the earning of $300 of the original purchase price and the sale price... yes, amazing that I had a profit there). Is that correct that I need to pay the taxes for the complete $16.3K even if I bought the car with my money after taxes in 2019?
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If you enter the vehicle information in the expense portion in your return, there is a check mark that indicates you stopped using it for business, then there is a box that you would list the date you stop using it for business.
There could be a gain. Here is how this works. The cash you got for the car is $16,300. Adding the depreciation equivalent will result in a sum of $19,030. Now you will subtract $15,700. Your taxable gain based on this is $3330. This amount may vary depending on if you claimed any mileage in 2023.
Hopefully, this will give you an idea how a taxable gain is determined for a sale of a business vehicle.
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